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Innovative Industrial Boosts Funding for Illinois Property

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Innovative Industrial Properties (IIPR - Free Report) recently announced entering into an amendment of lease with a subsidiary of Ascend Wellness Holdings, LLC (AWH), offering an additional funding of $8 million. This financing will support expansion of AWH’s regulated cannabis cultivation and processing facilities at a property in Barry, IL.

The move also led to the adjustment of the base rent under the lease to incorporate the impact of additional available funding as well as extension of the term of the lease agreement. Considering full payment of the supplementary funding, cannabis-focused real estate company Innovative Industrial Properties’ total investment in the property, which it originally acquired and entered into a long-term lease with AWH in December 2018, will reach $33 million.

The partnership with AWH, a vertically-integrated cannabis company, has taken place earlier as well, and the move will help Innovative Industrial Properties efficiently capitalize on the healthy market fundamentals. In fact, in July, Innovative Industrial Properties acquired and executed a lease with AWH for its regulated cannabis cultivation and processing facilities in Michigan.

According to Paul Smithers, president and chief executive officer of Innovative Industrial Properties, “It is heartening to see the many significant steps that Illinois officials have taken to open the medical cannabis market for patients in need, and we are excited to support AWH in the enhancement of this facility to meet that demand.”

The legalization of marijuana’s medical use in several states as well as allowing adult consumption in some states have opened up opportunities for the cannabis industry. Therefore, with more states in the United States giving cannabis the green light, Innovative Industrial Properties has incentive to partner with experienced medical-use cannabis operators and serve as a source of capital by acquiring and leasing back their real estate assets.

Particularly, in August, Illinois’ Compassionate Use of Medical Cannabis Program Act became a permanent program and the “pilot” designation was eliminated. Also, in the same month, a number of medical conditions were added to the program’s list of qualifying conditions for medical cannabis treatment.

Moreover, earlier this year, Illinois became the 11th state to approve the legalization of adult-use cannabis. Recently, first licenses to businesses were awarded to sell adult-use cannabis when the program commences in January 2020.

Innovative Industrial Properties currently carries a Zacks Rank #3 (Hold). In the year-to-date period, shares of the company have outperformed the industry. While the stock has surged 89.3%, the industry has gained 25% during this period.



Stocks to Consider

Investors can also consider some better-ranked stocks from the same space like Alexandria Real Estate Equities, Inc. (ARE - Free Report) , Equity Residential (EQR - Free Report) and Mid-America Apartment Communities, Inc. (MAA - Free Report) , each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alexandria Real Estate’s Zacks Consensus Estimate for 2019 funds from operations (FFO) per share has moved marginally north to $6.98 in the past three months.

Equity Residential’s FFO per share estimate for the current year moved up 1.2% to $3.45 over the past month.

Mid-America’s Zacks Consensus Estimate for the ongoing year’s FFO per share climbed marginally to $6.28 in a month’s time.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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